Why would anyone in Puerto Rico want a hurricane? Because someone will get rich

How tax breaks and a quasi-colonial status make the island vulnerable to disasters

By Yarimar Bonilla 

Yarimar Bonilla is the author of Non-Sovereign Futures: French Caribbean Politics in the Wake of Disenchantment and a founder of the Puerto Rico Syllabus. She is an associate professor of anthropology and Caribbean studies at Rutgers University and a visiting scholar at the Russell Sage Foundation.

This article was first carried in the Washington Post, September 22nd, 2017

 

Among those I interviewed this summer about Puerto Rico’s economic crisis was a local wealth manager who was extremely upbeat about the economic climate. Anticipating government default, she had redirected her clients’ assets toward U.S. stocks. Investments in the wake of President Trump’s election had been doing very well, she said, adding, “The only thing we need now is a hurricane.” She was referring to how such natural disasters bring in federal money for rebuilding and often become a boon to the construction industry. As I left her office, she encouraged me to buy stock in Home Depot.

After Hurricane Irma swiped Puerto Rico in early September, and with Maria dealing another devastating blow this past week, I’ve thought back repeatedly to this conversation. What conditions would lead someone to view a natural disaster as a boost for the economy? Who benefits from the vulnerability and precarity of those exposed to storms?

One peculiarity of this year’s hurricane season is that many of the societies that have been hit are not sovereign nations but rather places with diverse and shifting arrangements with their colonial centers. They include Guadeloupe and St. Martin — where residents are French citizens with European passports and representatives in the French National Assembly — as well as Puerto Rico and the U.S. Virgin Islands, where residents are American citizens but can neither vote in national elections nor have voting representation in Congress. They also encompass places like Anguilla — technically a self-governing state, but one whose defense and economic policy is determined by the British government and whose residents are “overseas citizens” of the United Kingdom.

The paradox of these Caribbean societies is that their economic challenges are often masked by an appearance of prosperity. Despite their relatively high incomes, places like Guiana, an overseas department of France, and Puerto Rico struggle with inflated prices for basic goods because of steep transportation costs from their colonial centers and restrictive legislation, such as the Jones Act, which limits their ability to engage in more favorable trade. This means many materials necessary for storm preparation — storm windows, generators, battery-powered electronics — carry price tags that are prohibitive for many. This spring, residents of Guiana sustained an 11-day mass strike to protest the economic hardship and social insecurity experienced by residents who feel ignored and abandoned by their government across the ocean.

Puerto Rico already had a higher rate of income inequality than any U.S. state, and it has only been made worse by tax incentives used to lure investors at the expense of a depleted public sector. Puerto Rico’s Act No. 22 allows wealthy investors to evade federal and local income tax by spending a minimum of 183 nights a year on the island. These types of initiatives promote the arrival of wealthy retirees and part-time Caribbean residents, who are able to erect multimillion-dollar mansions complete with hurricane-proof bunkers, while many of those born and raised in these societies must rely on public infrastructure that has been deeply eroded to service foreign debt and provide tax breaks.

As an unincorporated territory of the United States, Puerto Rico qualifies for aid programs including Federal Emergency Management Agency assistance. However, with a poverty rate nearly double that of Mississippi, failing infrastructure that has been neglected for more than a decade and a public sector that has been increasingly dismantled in response to the debt crisis, the island was already in a state of emergency long before the storm hit. This is why Irma, a weaker storm than Maria, managed to knock out power for almost the entire island and cause significant damage — not coincidentally in areas that are subject to long-standing issues of racial and social marginalization, violence and precarity, such as Vieques, Culebra and Loiza.

Natural disasters and moments of social and political upheaval mark the few occasions when these marginal citizens fleetingly appear in the national consciousness. In these moments, it’s common to hear debate about why these societies remain tied to their colonial centers. Why do these remnants of empire persist? What benefits do they provide? How can their metropoles “afford” what are seen by many as “expensive” imperial debris?

The most obvious answer is geopolitics: These far-flung territories provide military bases, satellite launching centers and footholds in important terrains. Less obvious is the fact that these societies are protected markets for national corporations. American companies such as Walmart and Walgreens have more stores per square mile in Puerto Rico than anywhere else in the world. Their prevalence is due in part to the deep subsidies they receive from the local government, which channels federal funds to help pay for training and payroll. The local government attempted to retain some of these profits by raising taxes on goods brought into Puerto Rico from foreign (including U.S.) distributors, but Walmart, the biggest private employer on the island, sued and threatened to leave.

Places like Puerto Rico also provide important economic cover for their colonial centers. Cheaper labor pools, lax environmental protections and economic loopholes make them attractive sites for speculative investment, money laundering and tax evasion. Indeed, it was Puerto Rico’s unique ability to issue triple tax exempt bonds — subject to neither state, federal nor municipal tax — which made it so irresistible to U.S. investors, leading in no small part to the current crisis.

The federal response to Puerto Rico’s economic crisis, the much-critiqued PROMESA Act , offered no solutions to the island’s problems. Rather than tackling the roots of Puerto Rico’s economic plight and the social fragility produced by a decade-long recession, it imposed a fiscal control board focused on short-term austerity policies with no economic vision for the island beyond restoring its market rating. The policies proposed include furloughs, decreased wages and tax hikes for the working poor, coupled with tax breaks and other incentives to help lure back American investors.

Part of why the PROMESA bill was so shortsighted was fear in Washington that the legislation would be viewed as a federal bailout . For many U.S. lawmakers, apparently, Puerto Ricans are not entitled to the same standard of living, health-care access and economic security as mainland citizens.

In anticipation of Hurricane Maria, Trump tweeted that help would be available to Puerto Rico. Meanwhile, the fiscal oversight board issued a statement that it would accelerate reconstruction projects as needed. Emergency funds will soon flow to the island, as the financial manager I interviewed predicted. But if history is any indication, they will do little to alleviate long-standing disparities or to remedy the conditions that put Puerto Rico at greatest risk. More likely, the expedited management of emergency money will only serve to fuel the drive for increased privatization and the gutting of public services. As was evident after the ground shook in Haiti, it is long-term structural problems that turn a disaster into a catastrophe. Vulnerability is not simply a product of natural conditions; it is a political state and a colonial condition.

 

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